The way consumers have purchased insurance has changed little over the last century, with a business model built not on speed, flexibility and innovation, but stability and consistency based on strict regulation and long-term relationships. Now, insurtechs are working to meet the rising expectations of younger customers purchasing products and services online, who want an insurance-buying experience that is seamless, fast and simple — as well as integrated into and connected with their purchase journey.

This is leading to greater exploration of API technology, which allows applications to talk to each other so that insurance firms can securely expose information and services to a wide range of partners. For the first time, through the power of public APIs at the point of sale, developers can now easily incorporate insurance into their own experience, alongside their main products.

For example, life insurance startup Haven Life, backed and wholly owned by MassMutual, just launched an API to offer its business partners access to Haven products. The API can be quickly implemented on their sites with a few lines of code, enabling them to offer customers and users a personalized quote for coverage without leaving the partner's web site. Then, the user seamlessly connects to Haven Life's simple online application process, which, if approved, can provide coverage starting that same day.

New York-based homeowner’s and renters insurance startup Lemonade launched an API last year. According to Shai Wininger, co-founder and COO of Lemonade, APIs make what was once a dream -- using behavioral economics to disrupt to the home and renter insurance market -- a reality: offering insurance instantly through an app.

“It takes years to pull together the licenses, capital, and technology needed to offer insurance instantly through an app, which is why it’s almost nonexistent,” he explains. “The Lemonade API changes that.”

Launched in October 2017, Lemonade’s API supports easy quoting, policy creation and payment for homeowners, condo, and renters insurance policies. It integrates with commerce websites, financial advisor apps, property management companies, payment software processors and IoT platforms.

People are more likely to add insurance while buying high-value items such as a new home or an expensive engagement ring, he adds. “Offering a seamless insurance experience at that point in time will drive more people to be properly covered.”

Transforming insurance at point of sale

For Clyde, a venture-backed technology company founded in 2018, transforming insurance at the point of sale starts with the highly-profitable extended warranty industry. The company’s API and insurance partnerships makes it simple to offer businesses on the Shopify platform a passive revenue source, by providing warranties to customers when they purchase a product. The business can download Clyde’s plug-in; quickly integrate it with its online store; match products to contracts; and set margins (Clyde collects the premiums).

“There is no extra code necessary for the business’s website and no partner to go through, they just need to download the app,” says Brandon Gell, founder and CEO of Clyde. “A newer generation wants to deal with things at point of sale natively in an application — very few people want to purchase something and then have to go through another process to insure a product or a service.”

Small businesses seeking to purchase insurance such as general liability, workers compensation or commercial property offer another example of an area where insurance shoppers have been underserved by large insurance companies and where APIs can help. Inaki Berenguer, CEO and co-founder of insurtech startup CoverWallet, had found it difficult to get coverage for his previous startups, and realized there was an opportunity for disruption.

“There was a long paper application that had to go through a traditional agent, which was very time-consuming and frustrating,” he says. “Our vision at CoverWallet was to make it extremely simple for small businesses to buy insurance.”

As CoverWallet, which was founded in 2015, began creating partnerships with other companies such as payroll providers, chambers of commerce and accountants, it wasn’t enough to simply add a company link as a recommendation for customers and members who wanted to purchase insurance. “Customers didn’t want to keep having to fill in the same information again and again on each site — for payroll, for accounting, for insurance, for a property agent,” he says. By exposing a part of their functionality to CoverWallet site with its API, companies can allow the customer’s data to automatically be filled in.

“The goal of the API is to bring insurance services to any other company out there without them having to do the heavy lifting,” he explains. “When you create an easier, faster, more convenient and delightful experience for the customer, you eventually win.”

Relevancy and incentives key to success

However, experts say that while several insurtechs have launched APIs, its use at the point of sale remains limited and may not disrupt the industry widely just yet.

“Currently the use of APIs in insurance is still in a very early stage,” says Matthew Josefowicz, president and CEO of insurance technology research firm Novarica. “The real question is whether the partner can make it a compelling part of the purchase process.” There are a limited number of online purchasing processes today where insurance is a natural fit for the customer journey at that particular point, he cautions.

Warranties for expensive online purchases, as Clyde is focusing on, as well home/rental insurance (Lemonade) and small business policies (CoverWallet) are all strong contenders, he concedes. But one of the challenges of these kinds of distribution partnerships is making sure that the incentives are significant enough for the partner to promote the offering.

“Just because you offer a bundle doesn’t mean the company running a website is incented to make sure their customers really purchase the insurance,” he says. “There has to be enough incentives for the primary merchant to cross-sell, essentially, and there has to be enough active consumer demand and education that helps consumers understand the ancillary benefits of buying insurance.”

And it has to be a product relevant to the customer journey at that moment, he adds. “There aren’t a lot of auto purchases online right now, but if there were I could see bundling in auto insurance coverage that way.”

Hopes for API Innovation and momentum

According to Novarica, point-of-sale distribution isn’t the most important future use of APIs. “I think cross-selling is going to be one application of API, but I don’t think it’s necessarily the one that’s most meaningful to insurance,” says Josefowicz. “I think improving internal architectures is probably the most valuable short-term application of APIs.” That is, companies may use an internal API in order to allow mobile applications or platforms to handle internal business processes such as HR or CRM.

But Lemonade’s Wininger believes that having insurance APIs in the market could spawn a new wave of ‘shallow-stack’ insurance startups that couldn’t have existed otherwise, leading to added momentum towards change.

“The barrier of entry to the insurance space is so high, that, in practice, it prevents many ideas from ever being born,” he says. “Our vision of enabling underwriting, pricing, billing, policy management and claim handling as an infinitely scalable infrastructure will introduce more innovation and competition, which will translate to an overall better and more affordable insurance for customers.”

And according to CoverWallet, the result of API use will be additional innovation “When you expose API, than others can innovate on top of you,” says Berenguer. “The beauty of the API economy is that people build on top of services of other people — you don’t have to build the foundation, just the innovation on top of the foundation.”

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